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Wal-Mart Earnings Miss Push These ETFs Down - ETF News And Commentary

Wal-Mart (
WMT
), the world's largest retailer, once again dampened investor's
mood by reporting lackluster first quarter fiscal 2015 results and
presenting a weak outlook. The company lagged earnings estimates
for the third time in the last five quarters.

Wal-Mart Earnings in Focus

Earnings per share of $1.10 missed the Zacks Consensus Estimate by
a nickel and were at the lower end of the management guidance of
$1.10-$1.20. The bottom line also deteriorated from the year-ago
earnings of $1.14. Revenues inched up 0.8% year over year to
$114.96 billion, but missed our estimate of $115.96 billion. This
represents the smallest quarterly sales growth in nearly five
years.

Unexpectedly cold and brutal winter during the quarter kept
shoppers away from Wal-Mart stores resulting in
higher-than-expected operating expenses that took a toll on its
revenue and profits (read:
Is It Finally Time to Buy Retail ETFs?
).

The company expects earnings per share in the range of $1.15-$1.25
for the second quarter, which is below the Zacks Consensus Estimate
of $1.28, suggesting that more pain is in store for the company.
Further, Wal-Mart expects U.S. comp sales to be relatively flat for
quarter against a decline of 0.3% in the year-ago quarter.

Rising investments in e-commerce and Sam's Club membership program
as well as higher health care costs would continue to weigh on
revenues and profits in the coming months.

Market Impact

The disappointing results and guidance sent WMT shares down as much
as 3.0% on Thursday's trading session on elevated volume. This
trend will likely continue at least in the near term given that WMT
has a poor
Zacks Industry Rank
in the bottom 29%, suggesting rough trading in the coming months.

This has put many consumer ETFs in focus for the coming days,
especially those funds with the largest allocation to this retail
giant. Investors should closely monitor the movement in these funds
and could catch the opportunity from any surge in the WMT price, or
avoid these if the company seemingly drags them down over the year.

This fund tracks the Market Vectors US Listed Retail 25 Index and
holds about 26 stocks in its basket with AUM of $27.5 million.
Average daily volume is light at under 40,000 shares while expense
ratio came in at 0.35%.

In terms of holdings, WMT is the top firm making up for 11.23% of
assets while sector wise, specialty retail occupies the first
position with one-third share, followed by double-digit allocation
to hypermarkets, departmental stores, drug stores and health care
services (read:
A Comprehensive Guide to Retail ETFs
).

RTH lost 1.08% on the day following the weak Wal-Mart results and
has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk
outlook.

The most popular consumer ETF on the market, XLP follows the
S&P Consumer Staples Select Sector Index, and has amassed over
$5.9 billion in its asset base. The fund charges 16 bps in fees per
year from investors and trades in heavy volume of more than 8
million shares a day.

In total, the fund holds about 42 securities in its basket with
Wal-Mart taking the fourth spot at 7.67%. The fund is skewed toward
food & staples retailing which makes up for one-fourth share,
closely followed by household products (20.41%) and beverages
(19.25%).

The product lost nearly 0.9% in yesterday trading and has a Zacks
ETF Rank of 4 or 'Sell' rating with a Medium risk outlook.

This fund manages a $1.8 billion asset base and provides exposure
to a basket of 109 consumer stocks by tracking the MSCI US
Investable Market Consumer Staples 25/50 Index. The product charges
a low fee of 14 bps per year from investors while trades in low
volume of less than 78,000 shares.

Here, WMT occupies the fifth position in the basket with 6.8%
allocation. The product is widely spread across household products,
soft drinks, packaged foods & meat and tobacco that make up for
double-digit allocation (see:
all the Consumer Staples ETFs here
).

VDC was down nearly 0.9% yesterday and has a Zacks ETF Rank of 4
with a Medium risk outlook.

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